Health Care Reform for Employers: The Summary of Benefits and Coverage

The Patient Protection and Affordable Care Act (“PPACA”), which was recently upheld by the Supreme Court, imposes a myriad of obligations on employers and group health plans.

To read this Alert in pdf, click here.

One of these obligations is a requirement for group health plans to provide a “Summary of Benefits and Coverage” (the “SBC”) to anyone who is eligible for the plan.  The idea behind the SBC is to help individuals more easily compare coverage options under the plan.

 The SBC requirement is deceptively complicated and is primarily governed by federal regulations issued earlier this year.  The penalties for noncompliance can be severe, and the new burden this requirement imposes on employers should not be underestimated.

 The attached Memorandum provides a brief overview of the SBC rules, with a focus on their impact on employers and their group health plans.  Given the complex nature of the SBC rules and PPACA, employers would be well advised to consult with experienced employee benefits counsel to ensure that they are in full compliance.

 Here, in very brief form, is our list of the “Top 6” things employers need to know about this new requirement:

 (1)   The SBC requirement will apply to plan years beginning on or after September 23, 2012.  For employers with calendar year plans, this means that the employer will need to:

 (a)   Have the SBC reflect the coverage it will be offering in 2013; and

 (b)   Distribute the SBC no later than the first day of the plan’s open enrollment period for 2013, which will typically be in November or December 2012.

 (2)   The requirement applies to all group health plans except federal governmental plans and certain “HIPAA excepted benefits,” such as retiree-only plans, stand-alone dental and vision coverage, most health FSAs, and certain HRAs.

 (3)   From the perspective of employers, the SBC requirement involves two key components:

 (a)   Insurance companies are required to provide the SBC to employers that are sponsoring a fully insured group health plan; and

 (b)   A group health plan is required to provide the SBC to employees who are enrolled in the plan and to their family members.  For a fully insured plan, this responsibility is shared by the insurance company and the plan administrator (which is typically the employer).  For a self-insured plan, the plan administrator is required to do this.

 (4)   There are specific rules regarding how to distribute the SBC. These distribution rules are discussed in detail in the attached Memorandum.

 (5)   The SBC must be prepared using a standard template provided by the Department of Labor.

 (6)   If the SBC is sent to individuals who are living in a county in which 10% or more of the residents are literate only in the same non-English language, special requirements apply – even if none of the SBC recipients actually speak that non-English language.

 So what should employers do now? Very briefly, here are several steps that should be taken:

• Determine which of your company’s health benefits are subject to the SBC requirement.
• If your plan is fully insured, contact your benefits consultant or insurance company to make sure the insurance company will be preparing and distributing the SBC in a timely manner.
• If your plan is self-insured, contact your third-party administrator to determine who will take responsibility for drafting the SBC.
• Work with your benefits consultant, insurance company, or third-party administrator to ensure that the SBC distribution rules are followed.

 Obviously, there is more to this reporting requirement than we can summarize in a short list.  A more detailed analysis of the new SBC requirement may be found in the attached Memorandum.  We hope it is helpful to you.

 If you have any questions regarding the new SBC requirement or, more generally, regarding the impact of health care reform on employers, please feel free to call Steven Smith, Eric Namee, or Brad Schlozman at (316) 267-2000.